Top Stories of Last Week

Regulatory

  • Central Bank of Bahamas announced digital fiat currency called Sand Dollar ready for launch on October 20 and that it would not only be used in domestic setting, but would incorporate solution to make it interoperable with global currencies.
  • G20 released report stating it is working with IMF, World Bank and Bank for International Settlements to formalize use of CBDC in banking systems. According to report, by end of 2022, all involved parties will have completed regulatory stablecoin frameworks and research and selection of CBDC designs, technologies and experiments. IMF and World Bank will have technical capabilities to facilitate CBDC transactions between countries by end of 2025. G20 roadmap about stablecoins follows joint report released by seven central banks in sketching out transnational front around nationalized digital currencies.
  • Shenzhen officials gave out 10 million yuan ($1.49 mil USD) in lottery for local residents in form of China’s DCEP for week-long trial run. 50,000 digital red packets or gift pouches containing 200 yuan ($30 USD) were awarded to residents living in Shenzhen that registered for lottery through iShenzhen, a blockchain-based application. 3,389 designated shops in Luohu accepted digital funds between October 12 and 18.
  • Bank of Japan released document outlining approach to CBDC that will begin first of several testing phases sometime in 2021, including development of test environment for currency and experiments on base functions as payment instrument.
  • Korea Blockchain Association is requesting regulators postpone South Korean government’s implementation of new 20% crypto trading tax plan until Jan. 1, 2023. KBA said crypto exchanges and companies in industry need reasonable period to prepare for Income Tax Act due to short window between regulations applying to old tax scheme and start of new one.

Project Development

  • NYDIG raised another $50 million growth equity fundraise led by Fintech Collective, with Bessemer Ventures and Ribbit Capital participating. As part of announcement, Stone Ridge Holdings Group revealed NYDIG is acting as custodian of 10,000 of parent company’s bitcoin, valued at $115 million. Additionally, firm also revealed it now acts as custodian for more than $1 billion, with number of clients quadrupling over past ten months.
  • Filecoin, the decentralized filing sharing protocol, launched mainnet at block 148,888 after raising $200 million in ICO over three years ago. Filecoin is a system from Protocol Labs meant to be both a decentralized file storage and content distribution network in one. Despite multiple delays, project has attracted considerable attention, particularly in China where investors have been speculating heavily on network’s mining hardware and FIL token.
  • Grayscale Investments posted best quarterly results to date in financial report for Q3 2020, which saw inflows of $1.05 billion across all products. Grayscale Bitcoin Trust saw inflows of $719.3 million in third quarter, and company said 81% of investment came from institutional investors, while 57% of investment came from those investing in multiple products.
  • Electric Coin Company is in process of transitioning to non-profit, called Bootstrap Project, after majority of Zcash shareholders elected to donate holdings in company. ECC will continue operating under same business structure, with Bootstrap acting as umbrella firm. Bootstrap will be helmed initially by ECC’s board of directors. Date for ECC’s donation to Bootstrap has not been specified, but is aimed for around network’s November hardfork, Canopy.
  • Security token firm Securitize signed agreement to purchase Distributed Technology Markets, a broker-dealer and alternative trading system registered with SEC and FINRA. As part of acquisition, Securitize will also acquire Velocity Platform, a money services business with licenses in several states. 

Exchanges

  • OKEx suspended all cryptocurrency withdrawals indefinitely, saying one of exchange’s key holders had been out of touch with exchange because they are currently cooperating with public security bureau in investigations and thus prevented withdrawal authorization from being completed. 
  • BitMEX CTO Samuel Reed released on $5 mil appearance bond. Reed is being represented by William J. Trach of Latham & Watkins LLP. Bitmex also announced that Malcolm Wright will come aboard as chief compliance officer. Wright comes with 30 years of experience in compliance and anti-money laundering, and currently chairs Advisory Council and AML Working Group at Global Digital Finance.

Fundraising

  • Aave announced raise of $25 million from Blockchain Capital, Standard Crypto and Blockchain.com Ventures, with investment to go toward growing team, growing Asian markets and bringing DeFi to institutional investors. 
  • Dapper Labs closed $18 million token sale raised on token sale platform CoinList, which announced details of raise saying that 13,000 people participated in offering from Sept. 21–Oct. 2.
  • Persistence closed $3.7 million token round led by Arrington XRP, along with Alameda Research and Terra, among others. Backers are purchasing Persistence token, or XPRT, which is set to be released sometime late this year or early next year. Company built back-end infrastructure for trade finance system that will allow small and medium-sized buyers to more easily find financing for commodities purchased from sellers.
  • Draper Goren Holm raised $25 million for venture capital fund to buffer its startup accelerator, with plan to invest $250,000 to $500,000 in seed, Series A and later investment rounds, the firm said, whereas the accelerator funds pre-seed rounds for between $10,000 and $50,000 and 4% to 10% ownership stakes in startups.

Defi

  • Blockchain infrastructure firm Bloq rolling out new product where users stake crypto, indicate risk preference and let platform conduct actual farming for them. Bloq’s new platform Vesper will offer users option to stake ETH, wrapped bitcoin or USDC starting mid-November.
  • Enterprise-based fintech platform COTI rolled out decentralized crypto market volatility index to help investors assess and quantify risks. cVIX is explicitly designed for DeFi market, created by computing a decentralized volatility index from cryptocurrency option prices and utilizing oracle network Chainlink as source for required financial data.

Things to Watch This Week

  • CBDC Developments
    • This week brings us the launch of the world’s first CBDC in the Sand Dollar, the Central Bank of the Bahamas’ digital fiat currency, on October 20th. Along with last week’s trial run of the China DCEP, in which roughly 2 million citizens of Shenzen were gifted digital yuan to use in nearly 4000 shops, it appears that central bank digital currency news is picking up steam, with several countries announcing trial phase periods or more details in the development process of their payment instruments in recent weeks. In addition, regulatory bodies are expediting research initiatives to formalize their regulatory framework for CBDCs, as seen in the report issued last week by the G20 along with the IMF, World Bank, and BIS. It will be important to keep an eye on the statements that are made later this evening when the IMF’s annual meeting takes place, as the topic of cross-border payments and their policy implications will be discussed. In particular, we’ll be watching as Fed Chairman Jerome Powell speaks and whether the Digital Dollar is mentioned in his remarks.
  • Bitmex and OKEx Fallout
    • Last week brought us news of OKEx suspending withdrawals on their exchange as a key holder was cooperating with a public security bureau in investigations and thus left the exchange unable to process withdrawal authorizations. The exchange has not issued any further statements since events unfolded and additional details are scant, but rumors abound. In addition to the news of the arrest of Bitmex’s CTO Samuel Reed, these recent events are focusing the market’s attention on the regulatory risk of centralized exchanges and the procedures that are in place in regards to their withdrawal protocols. It will be important to note the effects that these events have on other centralized exchanges and if it will scare retail traders into removing their balances from exchanges that have played things loosely with KYC and AML until this point. 
    • CoinDesk@CoinDesk
      “Let me just basically say how impressed I am by Ethereum, full stop, period.” –@CFTC Chairman @ChairmanHeath at #investeth.
      coindesk.com/heath-tarbert-…
      Andrew Kang@Rewkang
      .@compoundfinance @AaveAave @CreamdotFinance generate $70M annual interest on $2B of total deposits At the US national average 0.09% Savings Account rate, the same interest is generated by $78B of deposits 100%+ Yield farming APY isn’t required for DeFi to grow

      The largest commercial bank by deposits is Bank of America which has around $1.4T of deposits. Deposit interest on this ballparks to $1.3B DeFi money markets generate 5% of what BoA currently does for customer deposits
       
      Andre Cronje@AndreCronjeTech
      Unpacking some topics that I have been trying to consolidate for a few weeks now;
      link.medium.com/HXO2lIndBab

      Molly @bigmagicdao
      Things will get very interesting when filcoin launches
      1. billions $ worth of filecoin mining products(cloud mining/miners) are sold in the past few year
      2. Fil in circulation will be very small due to the locking terms
      3. Miners need deposit large amount of fil to mining fil

      90% of those pre-sold mining products are won’t be able to deliver $fil through actual mining, so those companies who sold filcoin mining products have to buy $fil from the market deliver to their customervunless they’ve planed to runway as soon as the filcoin launches.

      So either $fil gonna be pump so hard or there’s gonna be a lots of exitscam related to filecoin miners ..

      Ben Davenport@bendavenport
      84k BTC were mined in Q3. Just CashApp, Square & Microstrategy account for 169% of that. Grayscale accounts for another 70% (not necessarily all new purchases). Given lack of price movement, feels like there is a major seller in the market. When seller runs out of coins… moon.

      Corollary: There’s a limited time window to acquire sizeable positions without causing major price slippage.

      Hans HODL@hansthered
      Folks, we are very close to a tipping point. The amount of money going into Grayscale last quarter exceeded total #Bitcoin miner revenue for the quarter.
      Source: network-charts.coinmetrics.io twitter.com/Grayscale/stat…

      Why do I say we’re “close?” Currently only 68% of the inflows went to BTC, but look at the fine print. Source: grayscale.co/insights/grays

      Once BTC/USD inflows exceed what miners are producing, there will be a gravitational shift. In fact, we may have passed this point already. Remember, the supply schedule only declines from here and we don’t know exactly how much money is flowing into #Bitcoin

      The Paper 澎湃新闻@thepapercn
      Experience digital #renminbi in Shenzhen! As #China’s first E-CNY “red packets” are given out, users can use the money in their phones to pay at designated stores. Some say it’s similar to using third-party e-payment platforms but safer. #digitalcurrency
      WATCH: bit.ly/34TJh93

      Fidelity Digital Assets@DigitalAssets
      We are excited to share the second report in our Bitcoin Investment Thesis series by @riabhutoria. In this piece, we explore bitcoin’s role as an uncorrelated alternative investment that may provide portfolio optimization benefits.
      Please download: https://bit.ly/2GSyHa1
      Image

      ria(search)@riabhutoria
      In our most recent survey, 60% of the investors who believe digital assets belong in a portfolio said they should be considered alongside other alternatives In our new report, we explore bitcoin’s role as an alternative investment and portfolio optimization tool

      To be an effective diversifier, an investment should have low or negative correlations to other assets in a portfolio Bitcoin is one of the few assets that has been uncorrelated to traditional asset classes over longer periods of time

      The reasons for bitcoin’s lack of correlation historically may include: – Differing return and risk factors – Dynamic narratives – Lack of overlap between market participants – Being retail-driven

      Many investors believe bitcoin is very small compared to its addressable market and has significant upside potential For example, if bitcoin were to capture 5% of the alternatives market ($13.4T in 2018 as measured by CAIA), that would add an incremental $670B to bitcoin

      As bitcoin becomes more institutionally driven and if its narrative converges on a single thesis, it could become more correlated to certain assets, which could lessen its portfolio diversification benefits

      However, bitcoin is fundamentally less exposed to the prolonged economic headwinds other assets will face in the next months and years Combined with its multifaceted use cases, it could be a potentially useful addition to an investor’s toolkit
      READ MORE

      Timothy Peterson@nsquaredcrypto
      2/10 In 2017 I wrote how Metcalfe’s Law explains #bitcoin‘s value https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3078248…

      3/10 Since then I have correctly forecast #bitcoin year-end prices in 2018…
      4/10 …and in 2019. Note the 2020 #bitcoin forecast. This report was released Jan 3 2019, in honor of the genesis block 10th anniversary.

      6/10 On November 30th, 2020, #Bitcoin‘s price will be at or above $12,000 (90% probability). Write it down, screenshot it, whatever. I don’t care if you believe me or not.

      Bessemer@BessemerVP
      After several years of honing our thesis across the crypto landscape, we believe bitcoin will become a globally accepted asset class. Here’s why we invested in #NYDIG to be an institutional custodian and asset manager for bitcoin and other digital assets.
      bvp.com/news/out-of-st…
      Jake Chervinsky@jchervinsky
      1/ There’s been so much regulatory & enforcement news in crypto lately, it’s impossible to keep up. So instead of getting lost in the details, let’s step back & consider the big picture. What’s really going on here? In short: an ideological war over self-custody & privacy.

      2/ This thread is long but very important. If you believe in the principles of financial privacy & self-sovereignty at the heart of Bitcoin, as I do, you need to pay attention now. We’ve made the world stage, but our biggest challenges still lie ahead.

      20/ I fear we’re heading for a world where withdrawing crypto from exchanges to self-custody is restricted as a means of attacking privacy. We’d have two separate crypto markets: one of “clean” custodial coins & another of “dirty” self-sovereign ones, with no bridge between.

      21/ This is a worst-case scenario, to be sure, & all hope isn’t lost. Many of us are working to convince policymakers why it’s a terrible idea, & I’ll have a lot more to say on that soon. But you should know that it’s a live issue, & our main challenge for years to come. [end]

      READ MORE